Lack of quality assets means Citicorp stock won't be prospering

Answering the mail

September 18, 1991|By Andrew Leckey | Andrew Leckey,Tribune Media

Q. My broker has always advised me to buy on bad news, and that's all there seems to be with bank stocks. What do you think about Citicorp?

A.Don't bank on this stock prospering just yet.

Hold off buying shares of banking giant Citicorp (around $15 a share, New York Stock Exchange) until the quality of its assets starts to stabilize, advised Frank DeSantis, analyst with Donaldson Lufkin & Jenrette.

"While I'm currently neutral on Citicorp stock, there is really more positive than negative news," said DeSantis. "Things are improving."

It's primarily the problems with asset quality that keeps him from being more optimistic, since he believes it may be awhile before such industrywide woes can be worked through by the bank.

Q. With so many airlines filing bankruptcy or going out of business, and UAL Inc. going strong, should we buy more shares?

A. It may be time to come in for a landing.

Sell your shares of UAL Inc. (around $128, NYSE), parent company of United Airlines, for they may not have much upside potential for a while, said Mark Daugherty, analyst with Dean Witter Reynolds.

Wall Street analysts have lately noted the likelihood of a slower emergence from recession and the possibility of less air travel. UAL's stock price has taken a hit as a result.

There are remaining positives, however. These include the fact that UAL has reached a contract settlement with its pilots and that its bottom line is expected to bounce back. In addition, it established a new hub at London's Heathrow Airport this year, after obtaining government approval for its purchase of Pan Am's routes between that airport and five U.S. cities. It also obtained a Paris-to-Washington route. Yet all these positive factors should merely help the stock keep pace with the overall market.

Q. I've always wanted to buy shares of International Business Machines, but haven't been able to afford them. Now the time seems right. I'd appreciate your professional opinion.

A. Big Blue may be a bargain right now.

Buy shares of IBM (around $99, NYSE), the computer and information systems firm, because they are likely to outperform the overall market, said Phil Rueppel, analyst with Sanford C. Bernstein.

While IBM's share earnings plunged in the first half of this year, some pickup seems likely in the second half. The firm's new product line and its mainframe shipments should help drive earnings in the fourth quarter and into 1992, he believes. The company is also reaching out to form alliances with other manufacturers, another positive move.

Q. We were wondering if our stock certificate for Continental Dynamics Inc. represents a worthwhile investment, or if it is worthless?

A. Even a corporate overhaul didn't help this troubled company.

Continental Dynamics Inc., incorporated in Utah, was reorganized in Nevada as Continental Dynamics Ltd. That transaction was a share-for-cash exchange. That reorganization did little for the company and its charter was revoked in 1981, according to Robert Fisher, vice president with the New York-based R.M. Smythe & Co. stock-search firm.

The company is no longer in existence and your shares, unfortunately, are worthless.

Q. My husband and I rent and must repair a leaking ceiling because our landlord refuses to do anything about it. Can we get any tax deductions from the Internal Revenue Service because of this necessary repair?

A. No, there is no tax consequence with this transaction because there is no deduction given for home improvements, even if you owned the unit, said Barbara Pope, tax partner with Price Waterhouse.

Q. I am interested in buying shares in Stryker Corp. How does the future look for this company?

A. You'll have to keep a close eye on its stock price.

The future looks excellent for Stryker Corp. (around $29, over the counter), a developer of surgical and medical devices, said Richard Wholey of Chicago-based Wayne Hummer & Co.

Sales and earnings growth have been exceptional and future growth prospects are promising. However, its stock price already takes much of that fine potential into account.

Q. I bought 100 shares of Conner Peripherals and now have lost about one-third of my investment. What's going on?

A. Conner Peripherals (around $22, OTC), which makes high-performance Winchester disk drives for microcomputer workstations, has seen its price decline mostly due to concerns about price wars eroding its profits, said Sharon Conway, based in Chicago with A.G. Edwards & Sons Inc.

"Don't despair, however, since the company is financially sound, has a good relationship with its customers and by next year should have a 1.8-inch drive available," said Conway.

The volatility of the shares and lack of dividend make it a hold primarily for aggressive investors willing to assume risk now in hopes of future capital appreciation, she explained.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill. 60611.

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